Regional innovation could add $44 billion to economy each year, report finds

Regional businesses across Australia are more likely than their metropolitan counterparts to be innovating and “making things happen”, a new report from the Commonwealth Bank has found.

The Regional Business Insights Report has ranked businesses according to an Innovation Index from 0 to 100 based on 15 core drivers of innovation, covering management capabilities and entrepreneurship behaviours, including ability to focus on core areas, willingness to take risks, and seizing of opportunities.

With a score of 25 determining the “beginning of true innovation”, regional businesses score 25.5 compared to 23.6 for city businesses. The national average is 24.

According to the report, regional businesses do particularly well when it comes to management capabilities, with regional employers being more likely to encourage staff to ask challenging questions; 32 percent of regional employers also expect their staff to contribute creative ideas, compared to 25 percent in metro areas.

Grant Cairns, executive general manager of regional and agribusiness banking at Commonwealth Bank, said, “They’re encouraging people to challenge the status quo and expecting them to come up with creative ideas, and by doing this, many regional operators are unleashing the innovation potential of their teams.”

However, the question of what ‘innovation’ actually means remains an issue. While 84 percent of regional businesses surveyed stated they had implemented an innovation, the report found that when assessed against the Oslo Manual, an international standard for the collection and use of data on innovation activities in industry, just 49 percent are truly innovating; these are defined as ‘innovation active’ businesses.

The rest are making changes that, while valuable, count as business improvements rather than innovations, with Cairns explaining that “truly disruptive innovation is still relatively rare”.

At the moment, the report found regional businesses do particularly well at adopting new products and services – one of the building blocks of innovation – but the challenge is now to “turn innovation into a way of life, transforming it from a series of isolated initiatives into a disciplined and repeatable process spanning every aspect of the business”, Cairns said.

“Mastering innovation means making creativity and experimentation an essential part of your business’ DNA, rather than a one-off process improvement drive or product development program.”

Regional businesses are more likely to be focused on finding new efficiencies and boosting productivity through process innovation, as well as new marketing and promotional strategies, while metro businesses do better when it comes to product and service innovation; metro businesses are also more likely to be making improvements across most areas.

Sectors doing particularly well in regional areas are those focused on exporting, including construction, manufacturing and mining, agriculture, with small businesses also more likely to be innovating than larger businesses.

With regional businesses estimating the financial return from their investment in innovation to be an average of $279,000, contributing $19 billion to the economy each year, the report believes the regional economy could grow by $44 billion every year if every regional business across the country achieved the same return.

NSW is the top performing state when it comes to regional innovation, according to the report, scoring 29 on the Innovation Index; 58 percent of regional NSW businesses are innovating, with a further 30 percent making improvements.

The report comes as the number of initiatives looking to support regional innovation continues to grow.

Joining grassroots events like Regional Pitchfest and Agrihack, launched out of Wagga Wagga, are now government-led and backed projects; the Victorian Government’s LaunchVic body, for example, has put funding towards regional projects including Runway Geelong and a regional accelerator program run by La Trobe University, while the Queensland Government’s Advance Queensland funding program is also looking to support the development of regional hubs.

Image: supplied.